Farm Ireland

Friday 19 January 2018

EU farm payments could drop by 10pc - Teagasc economist warns

Louise Hogan

Louise Hogan

Potential benefits for sheep farmers from taking a slice of the UK's lamb export trade post-Brexit will likely be wiped out by lower subsidies, a Teagasc economist has warned.

Opportunities for lamb sales may rise if the 100,000t of UK sheepmeat exports destined for the EU are hit by penalties and tariffs, the Irish Grassland Association sheep conference heard.

However, any gains may be wiped out by other potential costs, a dip in beef prices and a slashing of EU payments.

Dr Kevin Hanrahan, head of Teagasc's rural economics unit, estimated direct payments to farmers from the EU may fall by as much as 10pc or €130m as the UK has been the second largest net contributor to the European budget.

He told farmers there would be a "hole" in the EU budget, with EU payments a key part of drystock farmers income.

"Almost certainly post-Brexit, the basic payment will get smaller in Ireland," he said. However, he stressed the key negotiators pledged to battle hard for the payments.

Sheep farmers heard a historical relationship between the UK and New Zealand and Australia had influenced the agreements struck to allow sheepmeat from 'Down Under' into the EU tariff-free.

Bord Bia's sheep market analyst Declan Fennell explained a large volume of New Zealand lamb goes to the UK, with the rest going to the EU. "In a post-Brexit era, where does the New Zealand quota end up?" he asked.

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"In a situation post-Brexit, will they have issues in terms of exporting product into the EU. I suppose that gives us a competitive edge and positions us as the number one exporter in the EU market," he said.

"We will never out-manoeuvre New Zealand in terms of scale or being more price competitive," he said; however, Irish lamb has a far superior taste.

Mr Fennell warned New Zealand was coming under huge pressures on water usage and to improve inland water quality.

"To achieve that, they have to put in the equivalent of 56,000kms of fencing to ensure the minimum amount of pollution to waterways. That is the equivalent of putting a fence from New Zealand to Europe three times," he said.

Ireland imports around 350,000 to 400,000 sheep from Northern Ireland every year. "In a Brexit situation, there is going to be a logistical and production issue there," said Mr Fennell.

With Bord Bia set to travel to Shanghai this week for a €3.7m campaign to promote European beef and lamb, Joe Ryan from Meat Industry Ireland said they still believed the country's sheep breeding flock could be expanded to hit three million and add an extra €150m into the sector.

He warned if the volume of lamb travelling from Ireland through the UK to France was hit by extra tariffs and checks, it would cause major issues.

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